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Are you following Charlie Barnhart's columns on EMS, ODM and OEM trends and business? His recent publication on 10 global trends confronting OEM operations is fascinating and chock full of ideas and stimulae for those working on strategies to move forward in the rapidly changing marketplace. Of note is his perspective, with which we agree, on the rate of increasing labor costs in China, slowing growth of outsourcing to EMS companies, unprecedented risk in supply chain sourcing, and shorter demand cycles. He states that OEMs have fewer resources. This applied to more than just OEMs. It includes suppliers of manufacturing equipment. This also provides ne opportunities for creative planning and actions.
Unimicron Technology still remains cautious about its printed circuit business outlook for the second quarter of 2013 after its revenues dropped 14% on quarter and 11% on year to NT$14.62 according to the DigiTimes.
Reza Meshgin, Chief Executive Officer of MFLEX, commented after announcing a 16% decline for the 2nd quarter ending March 31, "Due to continued soft market conditions, we plan to continue to focus on reducing inventory levels during the third quarter. Therefore, we plan to again minimize production which we expect to continue to pressure our gross margin during the quarter. We believe these conditions are temporary and continue to expect a rebound in revenue and profitability in the fourth quarter and further into fiscal 2014, when we anticipate an increase in demand from both long-standing and newer customers. During the second quarter, newer customers comprised approximately 8 percent of sales and we expect this contribution to double in the third quarter. We are optimistic that this new customer momentum will continue, and that a broader customer and product base will alleviate the current challenges associated with seasonality and product cycles as we enter into fiscal 2014." The Company expects net sales to be between $155 and $185 million and gross margin to be approximately breakeven based on production build plans, projected sales volume and anticipated product mix.
Another national treasure lost?
The April 26 news in The Gazette of Cedar Rapids announcing the impending closure of Rockwell Collins' 49 year old printed circuit operations should be spotlighted nationally for several reasons. It cites declining profits and business as the reason for the decision. It follows by just 6 months the layoff by Rockwell Collins of 300 workers. It signals the continued decline of manufacturing in America along with the accompanying know-how and innovation formerly ascribed to Collins' printed circuit business. It says that outsourcing PCB production is fairly common in the electronics industry. This is true. But then, the article states that Apple, the "most valuable company in the United States outsources the manufacture of all its components, including printed circuits." What it does not tell us is that these components are also primarily purchased and assembled into iPhones and iPads in China, mostly by Foxonn (Hon Hai). Tens of thousands of Chinese workers are employed to do this profitably for Apple. Is the Rockwell Collins spokesperson who was quoted inferring that Collins' boards are to also be made in China? Is there an ITAR isuue involved in this case? In any event, the announced closure plan should remind us that our once strong manufacturing base that produced nearly 60% of the jobs in the U.S. when the Collins PWB works was founded has now shrunk to about 20%, or less. Manufacturing in America is now reported to be only about 20% of our GDP. So I listen to all those that say we must bring jobs back to America and wonder, "How? Over what period of time? In what industries?"
NEPCON China held in Shanghai April 23-25 was busy - but with tire kickers not buyers. The show, slightly smaller than the previous edition, seemed to lack the excitement of previous years as business outlook was cloudy. Noted by its absence was Assemblion. Several former Chinese companies appear to have also dropped out now that Reed was applying uniform prices to all exhibitors. Chinese firms paid reduced fees for spaces in prior years.
There was little in the way of innovation. There was a plethora of Western reporters from virtually all of the related media. There were at least 3 well known industry journalists from the U.S. and Europe conducting video interviews in English as well as Chinese of exhibitors and celebrity attendees.
Concern over the economic effect caused by the Chinese-Japanese territorial tiff over the Senkaku/Diaoyu islands increased during the show as stories of customs delays in critical spare parts and new equipment shipments were reported. Japan is a major suppliers of SMT assembly and test equipment to our industry in China.
Dr. Philip Carmichael, the new IPC President of its China operations, was there meeting people, making presentations, negotiating collaborative deals for the future, and giving interviews. The photo above was taken during his IConnect007's video interview in Chinese by Edy Yu for "RealTime with NEPCON China". The interview is available for viewing at 007's on-line RealTime site. During his short tenure Dr. Carmichael has met every major organization in our industry in China to see how he can increase the value proposition of IPC members. Making sense of 23 different trade shows and major events can be daunting, but Carmichael seemed unfazed by the challenge. He has already increased IPC's China membership by about 20% this year. He advised us to watch for new announcements in the near
future. The IPC sponsored hand soldering competition remained a crowd pleaser in Shanghai as well as at its other previous venues.
CTEX 2013 which started as a show in Suzhou named "Circuitex" by Taiwan board makers will have its 9th presentation May 8-10 at the Suzhou International Exhibition Center. The name "Circuitex" was first coined by MacDermid in the early 1960's when it established its first specialty chemical line of products for the printed circuit industry. This year's presentation will cover bare boards, SMT and ICs with a focus on products for the iPhone5, IPad Mini, and Nexus 7 by Apple and Google. The event is being promoted as the 9th Suzhou PCB/SMT Show.
Comments from the CPCA event in Shanghai
"The first day of the show was moderate in attendance, the second was terrible, and the third day was worse. The weather was been wet and cold. But, I think that people are just not coming as they don't have enough business to justify the visit to the show."
"The PCB industry has matured. Most of the conventional processing equipment types have already been seen. It is difficult to draw the needed crowds to justify supplier expense in exhibiting, especially when the show is held simutaneously with another "electronics show" at a different venue, or within a week of other shows (Asia Solar PV Industry Exhibition, SEMICON China, International Trade Fair for Components & Assemblies, etc.) that draw from the same particular buying public. "
Our opinion: Horizons must be broadened to survive and thrive. Trade associations and exhibit producers will have to new create joint venues or find ways to partner in order to progress as HDI and print electronics move forward and advance along with flexible substrates in system packaging that brings semiconductor and board fabrication closer together.
Electronica & Productronica China 2013 held in Shanghai just a few days later appeared to draw the "Western" exhibitors that were absent from the CPCA event.
This column is intended to provide commentary on our industry and its events. It is based upon our own viewpoint on items that we believe to be of interest or importance. It is NOT intended to repeat what has already been reported, nor to echo all of the opinions already presented unless we feel the need for emphasis. In this case we believe that the Innovations Forum recently held in Germany, and organized by EPP Magazine and EMSNow and the IPC's ESTC (IPC Electronic System Technologies Conference and Exhibition) are the forerunners of a trend that will grow during the next decade. This movement will modify how we view our supply chains and relationships between innovater, maker, buyer and seller will change how we view and approach our activities in the various segments of our electronics manufacturing industries, e.g., medical, automotive, mobile computing, communications, industrial, and military.
A gathering of the clan
There was a "buzz session" at the IPC APEX show in San Diego in which most of the active members of the Raymond E. Pritchard Hall of Fame served as a panel to field questions from the audience. One of the questions asked was, "What must be done to bring PWB fabrication back to the United States?" A number of suggestions were offered by panel members. I believe that the question was ill framed. Why would anyone want to bring bare board building BACK to the U.S.? The word "BACK" says it all. We must go forward. We must further advance and integrate our technical and manufacturing capabilities and move forward to more of a systems approach to ensure a future. This includes new power generation (vis-a-vis the new nano solar antenna array developed at the University of Connecticut that is potentially 70% efficient versus the maximum conversion of about 20% for silicon), buried components, stacked and chip scale packages, thermal transmissions, optical circuit integration (yes that topic is "hot" again), and new/novel interconnect techniques - to mention a few opportunities. We cannot always totally dominate a "whole" technology. We must simultaneously focus on our own strengths while collaborating more with others to go forward.
I can provide specific examples based upon what I observed and learned at the San Diego event - if asked.
What do YOU think?
Another federal energy investment has gone South - no, make that West.
Lithium ion batteries have been in the news again following Boeing's highly publicized Dreamliner battery difficulties. China's Wanxiang Group has received clearance from the U.S.' Committee on Foreign Investment to acquire the assets of America's battery maker A123 for $257 million. The bankrupt A123, which makes batteries for electric cars and grid storage, was the recipient of $130 million of clean energy federal grants. The Wanxiang Group is an auto parts conglomerate.
Increased competitiveness and enormous changes (and opportunities?) through consolidation and acquisition
China's industry minister has put forth an aggressive goal of building five to eight giants in the electronics industry with $16+ billion in sales in the next two years through consolidation and overseas acquisitions and alliances. The Ministry of Information and Technology's blueprint wants to move the country away from low cost electronics manufacturing towards higher yielding, higher technical segments such as Lenovo and Huawei Technologies. We believe that China will reduce the mining of rare earth metals to increase margins and offset recent price declines while using these materials as leverage in foreign dealings. The country is still far behind the rest of the world in chip design and manufacture, so we can expect major moves in that arena. The China Development Bank will put $20 billion behind ZTE to help it reach the $16 billion goal. The Haier Group, one of China's bigger electronics companies, spent $700 million to buy a New Zealand company to increase access to Australia and Europe while increasing its technology base.
One has to wonder how the rest of the world will compete with this massive government supported approach. (China has a stated similar goal for automotive calling for 10 companies to have 90% of its industry concentration by 2015). One has to speculate who will join forces with China's electronic industry forays. How greatly does it threaten open markets and free competition elsewhere? How serious a role does industrial espionage play in this new game with newly stated ambitious goals? How big a role will defense issues and security have? Does America need a new vision for the future?
Looking for a new future
When will print electronics be ready for "prime time"? Or, have its initial forays into RFID chips and organic LED displays and lighting shown that this technology will forever be limited to niche (and possibly lucrative) markets? Venture funding for this industry has declined two years in a row to $626 million in 2012. It is our opinion that there will be a far greater and broader future in the electronics industry for graphene technology.
Graphene technology could speahead a new industrial revolution!
Graphene is a thin sheet of material composed of a single layer of carbon atoms.
A Nobel Prize was awarded for it just a few years ago (2010). It is the thinnest, strongest, most conductive material of both electricity and heat ever discovered. It is so dense that helium gas cannot pass through the single layer of atoms. It can be mixed with plastics to produce super strong conductive materials. It is transparent. Its applications range from semiconductors to ultra-capacitors, from touch screens to batteries, from solar cells to anodes. Samsung envisions a super thin flexible, touch sensitive smart phone made from this technology and already is the company with the most patents to its name. Graphene sheets will enable a new class of ultralight interconnect substrates ranging fom flexibles to HDIs.
At the close of 2012 China was the country with the most graphene patent publications (2,204). The U.S. had 1,754, South Korea had 1,160 and the UK, which started he research into this material in 2004, had only 54.
Is your company watching the progress with graphene? Are you aligned with any organization that is working in this arena? Are you planning to position your organization to take advantage of one or more of its opportunities during the next 3 to 5 years?
"The past is but a prelude to the future"
The following statement has been attributed to Cicero in 55 B.C. However, history Professor John Collins of Northern Illinois University stated that it actually originated in A Pillar of Iron (1965), Taylor Caldwell's fictionalized account of the life of the senator. As a result it is now neither substantiated nor disproven. It remains, though, an eternal object lesson and truism to us.
The budget should be balanced, the Treasury should be refilled, public debt should be reduced, the arrogance of officialdom should be tempered and controlled, and the assistance to foreign lands should be curtailed, lest Rome become bankrupt. People must again learn to work instead of living on public assistance."
This is the time of year that all of our industry seers reflect upon the past and forecast the future. It is an all but impossible task this time. Economic woes, political game playing, power plays, personal attacks, and continued posturing and bickering of elected officials in "Foggy Bottom" (Washington, D.C.) all remain with us - without problem resolution. They took an 11th hour step at year-end (2012) and beginning (2013) that defers major decisions, leaves the future of federal employees in doubt, eliminates the some tax increases for the"middle class" while increasing their payroll taxes. They defered facing the issue major cuts of sequestration for another two months while further dividing the country.
Meanwhile, there is talk of Japan's "new" (he was there once before) prime minister Shinzo Abe nationalizing the electronics industry in an attempt to save it.
At the same time, China’s manufacturing unexpectedly expanded in December at its fastest pace in 19 months, boosting optimism that a recovery in the world’s second-biggest economy is gaining traction.
As a result, I must admit that my crystal ball is not only broken, but it also appears to be cracked. However, there ARE some things evident to me!
We note that the prognosticators take a "long term" view and state that the production of printed circuit boards will reach $76.2 billion by 2015. The IDC's (International Data Corporation) Semiconductor Applications Forecaster states that semiconductor global growth for 2013 will be 4.9% to $319 billion following a 1% increase in 2012. It is expected to reach $368 billion in 2016.
We shall see the more talented EMS companies (those with strong engineering departments) add "box build" to their offered services.
We shall see a shift to a new form of hybrid regionalization in assembly manufacture as the labor cost differentials in the economically stronger regions.
We shall see new risk and cost analysis employed in the decison making process of deciding where to build a product and how much to build there. What will the major drivers be? Automotive electronics, tablets, "smart" phones, telematics, and new displays.
Fabricators will need to improve their capabilities in order to succeed in the future (in addition to cleaning up his act, stabilizing his work force, and training it better)? Most likely he will need a strong process engineering team and a very close communication link to designers to ensure that new boards or systems are designed for manufacture. Available processes and materials as well as cost options and the final package must all be considered.
Suppliers will have to provide materials with greater and finer dimensional tolerances and stability through a wider range of manufacturing cycles and environments.
ODM and OEM companies will have to re-evaluate the business strategy of partial or full regional manufacturing to provide product in within a particular geographic marketplace.
Assembly and fabrication equipment makers will have to consider new cost-cutting manufacturing strategies. E.g., noncompeting organizations could share overhead and direct costs by using a common custom "toll" manu-facturer for machine assembly.
All segments of the interconnect and electronic packaging industries supply chain will have to evaluate solving problems in providing products and technical support services to maturing or growing manufacturing areas as well as to local markets, e.g., Thailand and India.
Why-Oh-Why can't they get it right?
After 50 years in the business one would think that one would have seen some simple oft repeated problems resolved by the industry's fabricators. However, one of the most common explanations remains the fabricator's fabrications as to why an order is late or does not meet specifications. I asked several companies what were the 5 most recent problems encountered with the boards that they received during the last quarter of 2012. They were: Open circuits in innerlayers, misregistration, shorts in innerlayers, solder mask issues (scratches, peeling mask), and copper thickness under specification. These boards came from large "famous" suppliers, domestic suppliers, foreign suppliers, smaller "high quality" shops, established global companies, and local newer shops.
Really? In 2012?
Is the industry doomed to remain a "cottage industry" where scrap, remakes, and late deliveries will never cease to exist? Is this "way of life" solidly entrenched? Or, will it evolve to a higher level? Will the consumers of boards (OEMs and EMS companies) have to turn more to supply chain managers to guarantee that their purchases will arrive as ordered and on time? Hopefully, the new more aggressive global approach to standards and education being taken by the IPC will help advance the quality level of the world's fabricators.
What do you think? Let us know.
Feedback: Scratches are generally the result of poor training, careless handling or poor packaging. Peeling mask could probably have been prevented by the use of a resist bonding agent such as that provided by Duratech. Copper thickness issues could be due to solution maintenance, plating process and or equipment set up, or a random effect not picked up by statistical QC. Inner layer and misregistration problems could be caused by tooling (drilling, phototool, press) material selection and/or movement, press cycles and equipment. The designs coming in are pushing the technology too far, and too quickly. The biggest hits are minimum annular rings, with insufficient process and material considerations and allowances. Silicon manufacturers are reducing the component pitches at an alarming rate. The fabrication industry just can't seem to keep up. If fabricators would, in good faith, share well thought out technology roadmaps, then maybe they would have the time to stay ahead, or even keep pace with change. Assembly operations seem to be blind-sided at an inc5reasing pace, as well, and are having difficulty keeping up with rapid technology changes. They need certain performance characteristics, and therefore have to accept the tight packaging that comes with the turf. It used to be the military sector lagged the commercial sector by three to five years. Not any more!
There is a lot of speculation regarding Apple's stated intent to build a manufacturing site in the U.S. This is not a major move. Only 200 jobs will be created. I cannot help but wonder if this is related to *Foxconn's (Apple's major supply chain device manufacturer) recent offer to help train Americans in manufacturing technologies (see below). Is there a greater strategy about to be implemented? Is it the precursor to a potentially much larger move as costs continue to rise in China? America is still the major market for Apple where new products are introduced. Do Tim Cook and Terry Guo have a larger strategic plan? As Sherlock might say to Watson, "Methinks a new game is afoot."
For Americans, too? More cooperative activities reducing redundacy is needed between the IPC and the EIPC.
The EIPC made following announcement on December 3: The EIPC has made an effort to provide the latest information on Standards for PCBs from Japan. The 4th edition was released at the JPCA Show beginning of June 2011. The EIPC is encouraging the specialists in the European Electronic Industry to learn the knowledge that has been cumulated by the Japan Electronics Packaging and Circuits Association (JPCA) and documented in the: Standard on Device Embedded Substrate Terminology Reliability Test/Design Guide -Edition 4.0- JPCA-EB01 (2011) The English version of the document is on stock at the EIPC office in Maastricht, The Netherlands.